Business groups have applauded the Bank of England’s cautious approach to interest rate rises following yesterday’s decision to hold rates at four per cent.

The Bank’s Monetary Policy Committee (MPC) increased rates to 3.75 per cent in February, after encouraging economic data and strong consumer spending.

However, to the approval of business leaders, the MPC adopted wait-and-see tactics this month in order to give firms, especially those in manufacturing, more time to recover from the economic slump of the last two years.

Ian McCafferty, chief economic adviser at the Confederation of British Industry (CBI), said that the Bank was right to maintain its gradualist approach to rate rises.

“A second successive rise would have surprised business and the financial markets, undermining business confidence.

“With manufacturing joining the recovery in the service sector and consumer spending particularly resilient, we accept that rates will rise further in coming months.

“But this decision thankfully recognises the need for a steady hand, especially at a time when sterling’s strength against the dollar is beginning to worry exporters,” he said.

David Frost, director general of the British Chambers of Commerce (BCC), said that this was the best decision for business.

“After last month’s quarter point increase we should wait and see if consumer debt and house prices stabilise before raising rates any further.

“We urge the Bank to take a cautious approach in the coming months and maintain a favourable monetary policy for the business sector as long as it feasibly can,” he said.

Graeme Leach, chief economist at the Institute of Directors (IoD), said that the Bank was keeping its powder dry for another month.

“Following the decision to leave rates unchanged, the only question is when not if, interest rates will rise.

“Consumers and business should be aware that further interest rate rises are just around the corner,” he said.